Anybody have experience with mortgages?
Question: We currently owe approx $11K on our double, presently paying $350 a month at 5.25% interest, on a 10 year loan. (we live on one side)
We are in a situation where we would like to get moved to another home in the next 12 months. In order to do this, we need to free up some $. We had originally considered simply refinancing our mortgage to a 30 year, and freeing up some equity at the same time – until we saw how much all the fees added up to, and the new high interest rate we were offered.
I’ve done some calculations, and we need between $15,000 and $20,000 to fix up the old furnaces in our double so that this place is in good shape to rent when we’re moved out, and so that we have enough cash to make payments on a land contract home for about 15 months – while we make the transition from living here to a new place, and get this one paying for itself. (we spoke to a loan specialist at our credit union this morning, and she suggested that a land contract might work out for us well, especially given the number of houses presently sitting vacant)
Right now, most of our cash is being used up because we opted for a 10 year mortgage – which makes the move, and saving up any $ difficult.
We DO have about $12,000 in stocks set aside for our eventual auto costs, when our present car wears out. I’ve been thinking that perhaps we should use it to completely pay our house off? Part of me hates doing this to pay off a 5.25% loan though – especially when I’ve made a 43% return over the past 17 months on it. (MVL, BPL, then FNM & FRE) However, that’s really about the only way we could “retire” the original loan and make it so we don’t have to pay the $350 a month – at least that I can think of. (Ideas, anyone?)
We could either get a home equity loan now for the $15 to $20K we’d need, or else get a traditional second mortgage for that amount – a 30 year loan should get us $15 to $20K for roughly $100 to $140 a month in payments, right?
Then we could pay off our primary loan, and only have the $140 a month to worry about on this property. As soon as someone moved in and started paying rent, it would be taking care of itself.
Am I missing anything obvious here – another simple solution that might work out better for us?
Answer: I wrote myself a check from my credit card when they were offering a “3.99% until the balance is paid” option. The trick is to not use that card to charge anything else until the balance is paid. So, I got $28k for home improvements for a $150.00 “service fee” while paying 1.26% interest less than my mortgage. It was just easier and cheaper than getting another loan. It’s not secured so there were no hoops to jump through, and there’s no time limit. Plus, I can just pay the minimum for a few months while I make up that huge bite my once-yearly heating oil payment just caused!
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Filed under: Home Equity Loan
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